In this article what we are going to be looking at is how payday loans work, what the best uses for them are, and why there are misconceptions about them. By the end you should be able to see why they can be very helpful in a number of different situations.

How Payday Loans Work

You will find that applying for payday loans is extremely simple. It is all done online and once you have been approved, as you probably will be, it doesn’t take long for the money to transfer to your account. Usually it will be on the same day you make the application. Then you simply pay it all back, including the interest, when you’re next paid.

There are a couple of conditions to that though. First of all, obviously, you have to make enough from your job to be able to afford the loan from one pay cheque. Also, you usually have to get a monthly pay cheque so it is going to be the following month that you have to pay.

Apart from that, you are almost certainly going to be approved. There are only a few other technical details that you are going to have to meet, such as being over 18 years old and having a valid bank account. As long as you can afford the loan and you get a monthly salary though, you should be approved.

Best Uses for a Payday Loan

When it comes to the way that payday loans can be used, the way they work means that it is usually best to use them only in an emergency. If it’s not an emergency, meaning that it is an expense which either is not important or which you don’t have to make straight away, then it’s not going to be necessary to use a pay day loan.

Some of the most common uses for payday finance are to pay overdue utility bills, to pay for car repairs, and to make rent or mortgage payments. These are all things which, if you do not get a loan to make the payment, you could lose something very important, so they are certainly emergency situations.

Interest Rate Misconceptions

It’s unfortunate, given how useful a payday loan can be, that lots of people are put off them for reasons that do not actually tally with reality. The main one has to do with the misconception that the interest rates charged on them are extremely high. People get that idea from focusing on the APR.

The reason that judging payday finance by its APR is not a good idea is that this stands for Annual Percentage Rate. In other words, it measures how much interest you would have to pay in a year. As has already been mentioned, you usually have to repay in a month if you are going to get a loan of this sort though.

Of course it is completely absurd to judge a loan based on how expensive it would be if it took you 12 times longer to repay then it’s supposed to. We don’t do that with any other kind of loan. Just imagine going for a loan that should last 2 years and feeling that it is going to expensive because of how much interest you would have to pay in 24 years!

So instead of doing that, judging a pay day loan by how much you are going to have to pay if you don’t repay on time, it’s better to judge them by how much you’ll be charged if you do. That is normally going to be in the region of 25-30%. Which is actually quite a bit less than you get charged over the term of a conventional loan. So there’s no need to be put off by the interest charges on a pay day loan, so long as you can repay on time.

For some more advice regarding how to use payday finance visit the site where Logan Hill also often writes, Payday loans UK.

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There are a number of things which you have to consider when you are thinking about payday loans, most importantly that you can actually afford it. When it comes to actually finding a use for them, just about anyone can do that. But not all situations warrant using a payday loan of course.

Uses for Payday Loans

When it comes to what you can use payday loans for, it is practically limitless. Although there is going to be an upper limit of how much you can take out, the amount that you make in a month first of all and beyond that a payday lender often puts an upper limit of 1000 or thereabouts on loans. That’s enough to buy anything from a real car to a toy one though.

In both of those cases, however, they would be unlikely uses for a payday loan. It’s not to say that it is impossible, but if you wanted to get a toy car then you probably wouldn’t need a loan for that and it would rarely be an emergency either. You wouldn’t normally need to get a real car in an emergency either, and in that case it would usually be too expensive as well.

Having said that though, one of the reasons that payday finance turns out to be so useful is because it is a form of financing which is very flexible. So you could imagine a situation when getting a toy car, for example, would be an emergency. If that is what your child wants for their birthday for example, and you don’t have the money for it (maybe it’s remote controlled) then that could be an emergency.

To take the example of a real car, perhaps the one you have right now breaks down and it turns out that it is a write off. You need a new car right away, maybe so that you can get to work for example. So you might have to get something cheap straight away.

Emergency Situations

What you will take from the above examples, hopefully, is that payday loans are useful in an emergency. And only in emergencies really. After all, taking the first example, imagine that the child’s birthday is in two months time. Well, it would make no sense to get a loan now, when you could just use the money from your next pay cheque instead.

Also, if the car that you have right now still works, but you are on the look out for a new one, then it makes no sense to take out a payday loan to get it as that is just going to mean that you’ll have interest charges to pay on top.

Having said all of that though, there is one kind of situation when it doesn’t actually have to be an emergency. That would be when you find an extremely good, time-limited bargain. Let’s say that when you are looking for a car you find one that is not only what you are looking for, but it is reduced in price. It’s bound to be snapped up soon though, so you have to act fast. As long as the amount that you are saving is more than or equal to the interest charges on a pay day loan then it would be worth taking out the loan to get it.

So in that situation, you wouldn’t be using the payday loan because you were experiencing an emergency, instead it would be a purely financial consideration. That kind of situation doesn’t occur too often though, that you find a bargain which exceeds the interest you would have to pay on the loan.

This is not to say, however, that what you are charged in terms of interest by payday lenders is very high. Actually, if you directly compare how much you are charged by payday lenders overall and how much you are charged by long term lenders overall, you are usually being charged less by the payday lender.

There’s much more to learn about payday loans and Samuel Harrison, who has expertise on the topic, has written about it in more detail at Payday loans UK.

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When you first come across payday loans, it seems that the interest rates are not just high, they are shockingly high. However when you think about it in more depth it turns out that the first impression is actually the wrong one, because the APR is not really relevant. This article will explore why that is.

The APR

When it comes to the Annual Percentage Rate, or APR, this is something which is very useful for judging long term loans. That’s because conventional loans often last for a lot longer than a year, but with the APR people can judge how much interest they’ll be paying each year, and compare that with the amount of money that they make in a year. However as a way of thinking about payday loans it is not helpful at all.

It is quite clear to see why the APR is not a good way of judging payday finance when you think about the fact that it usually has to be paid back in around one month. So the APR is telling you how much it would cost you to miss the repayment schedule by 11 months. Perhaps an even better way of looking at it is that it tells you the interest charged for taking 12 times longer than intended.

Clearly then, the APR is not what you should be using to judge how much you are going to have to pay. The only way it can possibly be useful is by telling you that it should not be taking you that long to repay the loan. And if you need that kind of warning, perhaps loans that last 1 year should have the amount of interest that you would have to pay in 12 years in large type as well.

Real Interest Rates

What this should have demonstrated then is the ridiculousness of judging payday loans simply by the APR that is attached to them. They are such short term loans that it doesn’t really matter. The real interest rate you can discover by asking how much you are going to be charged overall, and then the discovery is that you are usually only being charged around 25% to 30%. So a lot less than the APR.

However even this might seem as if it is high if you are only judging long term loans by the APR that they charge. That isn’t telling you the total amount that they are charging though of course, unless the loan lasts for exactly a year. So if a real comparison is going to be made between short term loans and long term loans, you really have to look at how much is charged in interest overall.

One of the reasons that long term lenders like you to judge their loans by the APR is because if you looked at the full amount you had to pay in interest, it would look far worse. For example, if you take out a 5 year loan at around 17% APR, then you are going to end up paying close to 100% interest by the end of the term of the loan. So actually, a lot of the time, the total amount of interest you have to pay with a short term loan is less than what you have to with a long term loan.

Of course, just because the total amount of interest you have to pay with a short term loan is often less than what you have to with a long term loan, that doesn’t mean that it’s better to get a payday loan when what you really need is a bank loan. If you need a lot of money, to pay back over a long period of time, then a long term loan is still the best way to do that. If you just need a bit of money quickly though, then a pay day loan is appropriate.

Jackson Edwards is an expert in wide ranging financial matters. He can be found writing frequently at payday loans a place you can find out much more about payday finance.

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To understand the way that payday loans can be useful you are going to have to know how it is that work, which is what will be explored in this article. This is going to include the sorts of situations that they can be used in to the best effect, and what the application process is.

The Application Process

Just about all you are going to be asked about when you apply for payday loans is going to be your employment details. As well as personal details of course. This makes it a very easy application process, there aren’t any credit checks, and you’re not going to be asked what you need the money for.

Since it is generally required that you repay a payday loan on the occasion that you are next paid, the payday lender has to know about that. So they have to make sure that you get a monthly pay cheque, and that this is sufficient to be able to cover the amount that you are asking for. As well as the interest charged on that amount.

But why is it that a credit check is not performed? Well to understand that you have to know why long term lenders, such as banks, do make credit checks. They do that because nobody can really say what your financial situation is going to be like in a year from now, or however long the loan lasts for.

To get an idea of whether it is likely that you are going to be able to repay the loan or not then, long term lenders look at your credit history as a way of predicting the future. With a payday loan though that is not really necessary since you only have to make one payment, in about a month, and so a credit history will not tell them whether you are going to be able to do that or not.

Why Pay Day Loans Can be Useful

When are payday loans going to be useful then? Well, since it is so easy to get a loan of this sort, and you can get the money quickly, they will be useful any time you need some money fast. There are of course plenty of situations when that will be the situation.

One example would be when your car breaks down and you don’t have the money for the repairs. If you need your car in order to get to work then this would be an emergency situation in which you need money quickly to pay for the repairs. If you don’t really need to use your car then you might be willing to wait, but a short term loan might be very useful otherwise.

Of course there are many other situations when this sort of short term loan can be extremely useful. It is important that you are able to pay off the loan on time though. That’s because everything happens faster when you get a loan of this kind, you get the money faster, it’s necessary to pay it back sooner, and if you don’t then the interest rates will go up quicker as well.

If you do repay the loan on time then the interest you have to pay won’t be too high. It’s a misconception that there are high interest rates with payday finance because they have such high APRs, but that tells you only how much you would be charged in interest if it took you a year to pay off the loan.

Simply put then, that’s the way that pay day loans actually work, and why it is that in many situations they are useful. And why, if you’re having an emergency of some sort, they might be worth considering as a solution.

There is plenty more to discover regarding payday finance and Benjamin Scott, an authority on the topic, has written about it in detail at Payday Loans.

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When it comes to short term finance that you can get quickly, you have two main options. Either payday loans or an unauthorised overdraft. But which one is the better option? That’s what this article is going to be exploring.

How do Payday Loans Work?

The application process for payday loans is now very simple. It can all be done online. And you will have very few questions to answer, in fact apart from personal details it is mostly going to be about your monthly salary. That’s because it is with this information that payday lenders decide whether you can afford the loan or not. When you’re approved, the money should get to your account on the same day you apply.

When you get paid from your job next month, that’s when you have to pay the money back. That is why these loans have got the name “pay day” of course. Crucially, you have to repay all of the interest as well as the principal amount at the same time.

How Unauthorised Overdrafts Work

Although they are called “unauthorised” overdrafts, they are not really unauthorised in the sense that the bank does allow you to have it. What it really means is that it has not been prearranged.

The advantage to the bank of having people take money out with an unauthorised overdraft is that really they can charge whatever they feel like as they haven’t given authorisation for it. This means that you usually get charged every day that you are in overdraft.

Speed

In a financial emergency in which you need short term finance, the speed with which you can get the money is often going to be very important. So we’ll look at that first. And the pay day loan comes out well here of course, as you can usually have the money within the day once you have made the application online.

Really though, there is nothing that is going to be able to beat the unauthorised overdraft in terms of speed. After all there is absolutely no delay, the money is effectively in your account the whole time. So if you can’t even wait a few hours, or even minutes in some cases, then you might have to use the overdraft.

Bank Charges and Interest Rates

Since there aren’t going to be many situations when you need the money absolutely immediately, and you can wait a few hours at least, then the way that you will usually have to choose between payday loans and unauthorised overdrafts is how much they cost.

When it comes to costs, that is where many people think that pay day loans become a bad deal. They take one look at the APR and think they must be extremely expensive. And of course the APR is high, but that’s only because it should only take you a month to pay the loan back, not 12 months which is what the APR measures.

If we compare the APRs between these two sorts of short term loans though, that could be instructive. It’s not a very fair way of judging either, but it can be used as a good comparison to show which is more expensive.

The APR on unauthorised overdrafts does not have to be displayed because it is not technically a loan. However it has been calculated, and for one bank it was found to be 46,000,000%. That’s 46 million. In comparison, pay day loans only have an APR of something over 1000%. Here then, the payday loan clearly wins.

Having said that, however, if you are only going to be in overdraft for a day or two then that might be cheaper than taking out a month long loan with a pay day lender. You are certainly going to want to make sure that you can pay the money back in very short order in that case though.

To learn more about the actual rates of interest for payday finance go to Payday loans where Jackson Hall regularly writes.

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